nvcsr
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-22044
Eaton Vance Risk-Managed Diversified Equity Income Fund
(Exact Name of registrant as Specified in Charter)
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Maureen A. Gemma
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109
(Name and Address of Agent for Services)
(617) 482-8260
(registrants Telephone Number)
December 31
Date of Fiscal Year End
December 31, 2008
Date of Reporting Period
IMPORTANT
NOTICES REGARDING PRIVACY,
DELIVERY OF SHAREHOLDER DOCUMENTS,
PORTFOLIO HOLDINGS AND PROXY VOTING
Privacy. The Eaton Vance organization is committed
to ensuring your financial privacy. Each of the financial
institutions identified below has in effect the following policy
(Privacy Policy) with respect to nonpublic personal
information about its customers:
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Only such information received from you, through application
forms or otherwise, and information about your Eaton Vance fund
transactions will be collected. This may include information
such as name, address, social security number, tax status,
account balances and transactions.
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None of such information about you (or former customers) will be
disclosed to anyone, except as permitted by law (which includes
disclosure to employees necessary to service your account). In
the normal course of servicing a customers account, Eaton
Vance may share information with unaffiliated third parties that
perform various required services such as transfer agents,
custodians and broker/dealers.
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Policies and procedures (including physical, electronic and
procedural safeguards) are in place that are designed to protect
the confidentiality of such information.
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We reserve the right to change our Privacy Policy at any time
upon proper notification to you. Customers may want to review
our Policy periodically for changes by accessing the link on our
homepage: www.eatonvance.com.
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Our pledge of privacy applies to the following entities within
the Eaton Vance organization: the Eaton Vance Family of Funds,
Eaton Vance Management, Eaton Vance Investment Counsel, Boston
Management and Research, and Eaton Vance Distributors, Inc.
In addition, our Privacy Policy only applies to those Eaton
Vance customers who are individuals and who have a direct
relationship with us. If a customers account (i.e., fund
shares) is held in the name of a third-party financial
adviser/broker dealer, it is likely that only such
advisers privacy policies apply to the customer. This
notice supersedes all previously issued privacy disclosures.
For more information about Eaton Vances Privacy Policy,
please call
1-800-262-1122.
Delivery of Shareholder Documents. The Securities
and Exchange Commission (the SEC) permits funds to
deliver only one copy of shareholder documents, including
prospectuses, proxy statements and shareholder reports, to fund
investors with multiple accounts at the same residential or post
office box address. This practice is often called
householding and it helps eliminate duplicate
mailings to shareholders.
Eaton Vance, or your financial adviser, may household the
mailing of your documents indefinitely unless you instruct Eaton
Vance, or your financial adviser, otherwise.
If you would prefer that your Eaton Vance documents not be
householded, please contact Eaton Vance at
1-800-262-1122,
or contact your financial adviser.
Your instructions that householding not apply to delivery of
your Eaton Vance documents will be effective within 30 days
of receipt by Eaton Vance or your financial adviser.
Portfolio Holdings. Each Eaton Vance Fund and its
underlying Portfolio (if applicable) will file a schedule of its
portfolio holdings on
Form N-Q
with the SEC for the first and third quarters of each fiscal
year. The
Form N-Q
will be available on the Eaton Vance website www.eatonvance.com,
by calling Eaton Vance at
1-800-262-1122
or in the EDGAR database on the SECs website at
www.sec.gov.
Form N-Q
may also be reviewed and copied at the SECs public
reference room in Washington, D.C. (call
1-800-732-0330
for information on the operation of the public reference room).
Proxy Voting. From time to time, funds are required
to vote proxies related to the securities held by the funds. The
Eaton Vance Funds or their underlying Portfolios (if applicable)
vote proxies according to a set of policies and procedures
approved by the Funds and Portfolios Boards. You may
obtain a description of these policies and procedures and
information on how the Funds or Portfolios voted proxies
relating to portfolio securities during the most recent
12 month period ended June 30, without charge, upon
request, by calling
1-800-262-1122.
This description is also available on the SECs website at
www.sec.gov.
Eaton Vance Risk-Managed Diversified Equity Income Fund as of December 31, 2008
MANAGEMENTS DISCUSSION OF FUND PERFORMANCE
Economic and Market Conditions
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Global equity markets suffered profound losses during 2008, a year that will likely go down as
one of the worst in modern financial market history. The U.S. economy held up relatively well during the first half of the year, but the simultaneous bursting
of the housing, credit and commodity bubbles created a global financial crisis of unforeseen
levels. Equity markets collapsed during the second half of the year, as a series of catastrophic
events on Wall Street induced panic and fear among market participants. Additionally, commodity
prices collapsed during the second half of 2008 and after peaking at more than $145 per barrel in
July, oil prices traded down to around $44 at year end. The U.S. economy was officially declared
in recession during the fourth quarter as unemployment continued to rise. The Federal Reserve
responded to the crises with a dramatic cut in interest rates. |
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Equity markets posted double-digit declines for the year ended December 31, 2008. The S&P 500
Index suffered its worst loss since 1937, while the Dow Jones Industrials Average experienced the
third-worst loss in its history. By the end of 2008, equity losses approached $7 trillion of
shareholder wealth, erasing the gains of the last six years. On average, small-capitalization
stocks slightly outperformed large-capitalization stocks and value-style investments fared better
than growth-style investments. |
Walter A. Row, CFA
Eaton Vance
Management
Co-Portfolio Manager
Michael A. Allison, CFA
Eaton Vance
Management
Co-Portfolio Manager
Ronald M. Egalka
Rampart Investment
Management
Co-Portfolio Manager
Past performance is no guarantee of future results. Returns are historical and are calculated by
determining the percentage change in net asset value or share price (as applicable) with all
distributions reinvested. The Funds performance at share price will differ from its results at
NAV. Although share price performance generally reflects investment results over time, during
shorter periods, returns at share price can also be affected by factors such as changing
perceptions about the Fund, market conditions, fluctuations in supply and demand for the Funds
shares, or changes in Fund distributions. The Fund has no current intention to utilize leverage, but may do so in the future through
borrowings and/or other permitted methods. Investment return and principal value will fluctuate
so that shares, when sold, may be worth more or less than their original cost. Performance is
for the stated time period only; due to market volatility, the Funds current performance may be
lower or higher than the quoted return. For performance as of the most recent month end, please
refer to www.eatonvance.com.
Management Discussion
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The Fund is a closed-end fund and trades on the New York Stock Exchange (NYSE) under the symbol
ETJ. The Funds primary investment objective is to provide current income and gains, with a
secondary objective of capital appreciation. The Fund pursues its investment objectives by
investing in a portfolio of common stocks and index put options. Under normal market conditions,
the Fund seeks to generate current earnings by writing (selling) put options on individual stocks
and index call options with respect to a portion of its common stock portfolio value. During the
year ended December 31, 2008, the Fund continued to provide shareholders with attractive quarterly
distributions. |
Eaton Vance Risk-Managed Diversified Equity Income Fund
Total Return Performance 12/31/07 12/31/08
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NYSE Symbol |
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ETJ |
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At Net Asset Value (NAV)1 |
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-1.17 |
% |
At Share Price1 |
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9.60 |
% |
S&P 500 Index2 |
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-36.99 |
% |
CBOE S&P 500 BuyWrite Index2 |
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-28.65 |
% |
Lipper Options Arbitrage/Options Strategies Average2 |
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-31.82 |
% |
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Premium/(Discount) to NAV as of 12/31/08 |
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3.69 |
% |
Total Distributions per share3 |
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$ |
1.80 |
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Distribution Rate4 |
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At NAV |
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10.38 |
% |
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At Share Price |
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10.01 |
% |
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See page 3 for more performance information. |
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1 |
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During the year ended December 31, 2008, the Fund elected to retain a portion of its
realized long-term gains and pay the required federal corporate income tax on such amount.
The total returns presented in the table include the economic benefit to common shareholders
of the tax credit or refund available to them, which equaled their pro rata share of the tax
paid by the Fund. If this benefit were not included in the returns, the Total Return at Net
Asset Value would have been -4.54% and the Total Return at Share Price would have been 5.87%. |
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2 |
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It is not possible to invest directly in an Index or a Lipper Classification. The
Indices total returns do not reflect commissions or expenses that would have been incurred
if an investor individually purchased or sold the securities represented in the Indices. The
Lipper total return is the average total return, at net asset value, of the funds that are in
the same Lipper Classification as the Fund. |
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The economic benefit to common shareholders of the tax credit or refund available to
them because the Fund retained and paid federal corporate income tax on a portion of its
long-term capital gains equaled $0.612 per share. This amount is not included in Total
Distributions per share. |
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4 |
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The Distribution Rate is based on the Funds most recent quarterly distribution per share
(annualized) divided by the Funds NAV or share price at the end of the period. The Funds
quarterly distributions may be comprised of ordinary income, net realized capital gains and
return of capital. |
Fund shares are not insured by the FDIC and are not deposits or other obligations of, or
guaranteed by, any depository institution. Shares are subject to investment risks, including
possible loss of principal invested.
1
Eaton Vance Risk-Managed Diversified Equity Income Fund as of December 31, 2008
MANAGEMENTS DISCUSSION OF FUND PERFORMANCE
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At net asset value (NAV), the Fund outperformed the comparative indices the S&P 500 Index and
the CBOE S&P 500 BuyWrite Index for the year ended December 31, 2008. The Funds market share
price traded at a premium to NAV, as equity markets reached record levels of volatility in the last
three months of the year, which created opportunities to earn option premiums. More specifically,
the Funds use of long put options helped offset significant equity market downside experienced in
the second half of the year. As of December 31, 2008, the Funds premium to NAV was 3.69%. |
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At December 31, 2008, the Fund maintained a portfolio of dividend-paying stocks, broadly
diversified across the U.S. economy. Among the Funds common stock holdings, its largest sector
weightings at December 31, 2008 were information technology, health care, consumer staples,
financials and industrials. The Funds relative performance was helped by stock selection in
financials, information technology and health care. The Funds relatively limited exposure to
insurance and diversified financial companies helped performance, particularly in the second half
of 2008. The Funds investments in utilities and energy companies detracted from performance as oil
prices declined significantly in the fourth quarter, contributing to further weakness in the
overall economy. |
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As of December 31, 2008, the Fund had written call options on approximately 100% of its equity
holdings. The Fund seeks current earnings in large part from option premiums, which can vary with
investors expectations of the future volatility (implied volatility) of the underlying assets. The year 2008 witnessed continued high levels of implied volatility in concert with a significant
level of actual volatility in the equity markets, particularly in the last four months of the
year. The Fund was able to monetize some of this volatility in the form of higher premiums,
which provided a positive benefit to the Fund. Of course, in future periods of strong market
growth, this strategy may lessen returns relative to the market. |
The views expressed throughout this report are those of the portfolio managers and are current
only through the end of the period of the report as stated on the cover. These views are subject
to change at any time based upon market or other conditions, and the investment adviser disclaims
any responsibility to update such views. These views may not be relied on as investment advice
and, because investment decisions for a fund are based on many factors, may not be relied on as an
indication of trading intent on behalf of any Eaton Vance fund. Portfolio information provided in
the report may not be representative of the Funds current or future investments and may change
due to active management.
2
Eaton Vance Risk-Managed Diversified Equity Income Fund as of December 31, 2008
FUND PERFORMANCE
Fund Performance
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NYSE Symbol |
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ETJ |
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Average Annual Total Returns1 (at share price, New York Stock Exchange) |
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One Year |
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9.60 |
% |
Life of Fund (7/31/07) |
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6.96 |
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Average Annual Total Returns1 (at net asset value) |
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One Year |
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-1.17 |
% |
Life of Fund (7/31/07) |
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4.27 |
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1 |
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During the year ended December 31, 2008, the Fund elected to retain a portion of its
realized long-term gains and pay the required federal corporate income tax on such amount.
The total returns presented in the table include the economic benefit to common shareholders
of the tax credit or refund available to them, which equaled their pro rata share of the tax
paid by the Fund. If this benefit were not included in the returns, the returns would have
been 5.87% (at share price) and -4.54% (at net asset value) for the one year ended December
31, 2008 and 4.38% (at share price) and 1.76% (at net asset value) for the Life of Fund. |
Past performance is no guarantee of future results. Returns are historical and are calculated by
determining the percentage change in net asset value or share price (as applicable) with all
distributions reinvested. The Funds performance at share price will differ from its results at
NAV. Although share price performance generally reflects investment results over time, during
shorter periods, returns at share price can also be affected by factors such as changing
perceptions about the Fund, market conditions, fluctuations in supply and demand for the Funds
shares, or changes in Fund distributions. The Fund has no current intention to utilize leverage,
but may do so in the future through borrowings and/or other permitted methods. Investment return
and principal value will fluctuate so that shares, when sold, may be worth more or less than their
original cost. Performance is for the stated time period only; due to market volatility, the
Funds current performance may be lower or higher than the quoted return. For performance as of
the most recent month end, please refer to www.eatonvance.com.
Fund Composition
Top Ten Holdings1
By total investments
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Exxon Mobil Corp. |
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2.4 |
% |
Wal-Mart Stores, Inc. |
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2.1 |
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International Business Machines Corp. |
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2.0 |
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Microsoft Corp. |
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2.0 |
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Chevron Corp. |
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1.9 |
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JPMorgan Chase & Co. |
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1.8 |
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Philip Morris International, Inc. |
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1.8 |
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AT&T, Inc. |
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1.7 |
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Hewlett-Packard Co. |
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1.6 |
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Johnson & Johnson |
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1.6 |
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1 |
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Top Ten Holdings represented 18.9% of the Funds total investments as of 12/31/08. The Top
Ten Holdings are presented without the offsetting effect of the Funds written option
positions at 12/31/08. Excludes cash equivalents. |
Common Stock Sector Weightings2
By total investments
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2 |
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Reflects the Funds total investments as of 12/31/08. Common Stock Sector Weightings
are presented without the offsetting effect of the Funds written option positions at
12/31/08. Excludes cash equivalents. |
3
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
PORTFOLIO OF INVESTMENTS
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Common
Stocks 82.6%
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Security
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Shares
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Value
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Aerospace
& Defense 4.0%
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Boeing Co. (The)
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80,987
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$
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3,455,715
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General Dynamics Corp.
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185,629
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10,690,374
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Lockheed Martin Corp.
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145,323
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12,218,758
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Raytheon Co.
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221,309
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11,295,611
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United Technologies Corp.
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212,884
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11,410,582
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$
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49,071,040
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Auto
Components 0.6%
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Johnson Controls, Inc.
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374,200
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$
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6,795,472
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$
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6,795,472
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Beverages 2.0%
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Coca-Cola
Co. (The)
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146,838
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$
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6,647,356
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PepsiCo, Inc.
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316,682
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17,344,673
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$
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23,992,029
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Biotechnology 3.0%
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Amgen,
Inc.(1)
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269,225
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$
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15,547,744
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Biogen Idec,
Inc.(1)
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95,566
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4,551,809
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Genzyme
Corp.(1)
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200,377
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13,299,021
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Gilead Sciences,
Inc.(1)
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64,128
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3,279,506
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$
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36,678,080
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Capital
Markets 1.9%
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Goldman Sachs Group, Inc.
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73,398
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$
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6,194,057
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Invesco, Ltd.
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185,422
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2,677,494
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Julius Baer Holding AG
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72,607
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2,814,053
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Northern Trust Corp.
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124,319
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6,481,993
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T. Rowe Price Group, Inc.
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134,024
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4,749,811
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$
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22,917,408
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Chemicals 1.0%
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E.I. Du Pont de Nemours & Co.
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287,906
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$
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7,284,022
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Monsanto Co.
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80,121
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5,636,512
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$
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12,920,534
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Commercial
Banks 1.6%
|
|
Banco Bradesco SA ADR
|
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|
1
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|
|
$
|
5
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Wells Fargo & Co.
|
|
|
677,494
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|
|
|
19,972,523
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|
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|
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$
|
19,972,528
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Commercial
Services & Supplies 0.9%
|
|
Waste Management, Inc.
|
|
|
321,556
|
|
|
$
|
10,656,366
|
|
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|
|
|
|
|
|
|
|
|
$
|
10,656,366
|
|
|
|
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|
Communications Equipment 2.7%
|
|
Cisco Systems,
Inc.(1)
|
|
|
938,817
|
|
|
$
|
15,302,717
|
|
|
|
QUALCOMM, Inc.
|
|
|
496,158
|
|
|
|
17,777,341
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,080,058
|
|
|
|
|
|
|
Computers
& Peripherals 5.0%
|
|
Apple,
Inc.(1)
|
|
|
192,888
|
|
|
$
|
16,462,991
|
|
|
|
Hewlett-Packard Co.
|
|
|
554,054
|
|
|
|
20,106,620
|
|
|
|
International Business Machines Corp.
|
|
|
300,410
|
|
|
|
25,282,506
|
|
|
|
|
|
|
|
|
|
|
|
$
|
61,852,117
|
|
|
|
|
|
|
Diversified
Financial Services 3.1%
|
|
Bank of America Corp.
|
|
|
744,180
|
|
|
$
|
10,478,054
|
|
|
|
Citigroup, Inc.
|
|
|
674,384
|
|
|
|
4,525,117
|
|
|
|
JPMorgan Chase & Co.
|
|
|
738,611
|
|
|
|
23,288,405
|
|
|
|
|
|
|
|
|
|
|
|
$
|
38,291,576
|
|
|
|
|
|
|
Diversified
Telecommunication Services 2.8%
|
|
AT&T, Inc.
|
|
|
736,453
|
|
|
$
|
20,988,910
|
|
|
|
Verizon Communications, Inc.
|
|
|
409,824
|
|
|
|
13,893,034
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,881,944
|
|
|
|
|
|
|
Electric
Utilities 1.5%
|
|
Edison International
|
|
|
254,177
|
|
|
$
|
8,164,165
|
|
|
|
FirstEnergy Corp.
|
|
|
209,233
|
|
|
|
10,164,539
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,328,704
|
|
|
|
|
|
|
Electrical
Equipment 1.5%
|
|
Emerson Electric Co.
|
|
|
326,024
|
|
|
$
|
11,935,739
|
|
|
|
Vestas Wind Systems
A/S(1)
|
|
|
101,595
|
|
|
|
5,978,539
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,914,278
|
|
|
|
|
|
|
Energy
Equipment & Services 1.2%
|
|
Diamond Offshore Drilling, Inc.
|
|
|
68,034
|
|
|
$
|
4,009,924
|
|
|
|
Schlumberger, Ltd.
|
|
|
246,717
|
|
|
|
10,443,531
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,453,455
|
|
|
|
|
|
|
Food
& Staples Retailing 3.2%
|
|
CVS Caremark Corp.
|
|
|
298,765
|
|
|
$
|
8,586,506
|
|
|
|
See
notes to financial statements
4
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
PORTFOLIO OF
INVESTMENTS CONTD
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Shares
|
|
|
Value
|
|
|
|
|
|
Food
& Staples Retailing (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Kroger Co. (The)
|
|
|
150,931
|
|
|
|
3,986,088
|
|
|
|
Wal-Mart Stores, Inc.
|
|
|
484,099
|
|
|
|
27,138,590
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,711,184
|
|
|
|
|
|
|
Food
Products 1.7%
|
|
Nestle SA
|
|
|
212,194
|
|
|
$
|
8,402,488
|
|
|
|
Nestle SA ADR
|
|
|
305,917
|
|
|
|
12,144,905
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,547,393
|
|
|
|
|
|
|
Health
Care Equipment & Supplies 1.9%
|
|
Baxter International, Inc.
|
|
|
125,057
|
|
|
$
|
6,701,805
|
|
|
|
Becton, Dickinson & Co.
|
|
|
79,365
|
|
|
|
5,427,772
|
|
|
|
Boston Scientific
Corp.(1)
|
|
|
458,032
|
|
|
|
3,545,168
|
|
|
|
Covidien, Ltd.
|
|
|
86,803
|
|
|
|
3,145,741
|
|
|
|
Medtronic, Inc.
|
|
|
157,666
|
|
|
|
4,953,866
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,774,352
|
|
|
|
|
|
|
Health
Care Providers & Services 1.2%
|
|
Aetna, Inc.
|
|
|
157,946
|
|
|
$
|
4,501,461
|
|
|
|
Fresenius Medical Care AG & Co. KGaA ADR
|
|
|
117,129
|
|
|
|
5,526,146
|
|
|
|
UnitedHealth Group, Inc.
|
|
|
172,480
|
|
|
|
4,587,968
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,615,575
|
|
|
|
|
|
|
Hotels,
Restaurants & Leisure 1.4%
|
|
McDonalds Corp.
|
|
|
273,699
|
|
|
$
|
17,021,341
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,021,341
|
|
|
|
|
|
|
Household
Durables 2.1%
|
|
Centex Corp.
|
|
|
328,045
|
|
|
$
|
3,490,399
|
|
|
|
D.R. Horton, Inc.
|
|
|
547,417
|
|
|
|
3,870,238
|
|
|
|
KB Home
|
|
|
247,231
|
|
|
|
3,367,286
|
|
|
|
Lennar Corp., Class A
|
|
|
420,940
|
|
|
|
3,649,550
|
|
|
|
NVR,
Inc.(1)
|
|
|
6,588
|
|
|
|
3,005,775
|
|
|
|
Pulte Homes, Inc.
|
|
|
357,059
|
|
|
|
3,902,655
|
|
|
|
Ryland Group, Inc.
|
|
|
59,212
|
|
|
|
1,046,276
|
|
|
|
Toll Brothers,
Inc.(1)
|
|
|
178,349
|
|
|
|
3,822,019
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,154,198
|
|
|
|
|
|
|
Household
Products 2.4%
|
|
Clorox Co. (The)
|
|
|
53,631
|
|
|
$
|
2,979,739
|
|
|
|
Colgate-Palmolive Co.
|
|
|
160,003
|
|
|
|
10,966,606
|
|
|
|
Procter & Gamble Co.
|
|
|
251,475
|
|
|
|
15,546,184
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,492,529
|
|
|
|
|
|
|
Industrial
Conglomerates 2.3%
|
|
3M Co.
|
|
|
188,422
|
|
|
$
|
10,841,802
|
|
|
|
General Electric Co.
|
|
|
1,043,130
|
|
|
|
16,898,706
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,740,508
|
|
|
|
|
|
|
Insurance 3.7%
|
|
ACE, Ltd.
|
|
|
126,078
|
|
|
$
|
6,672,048
|
|
|
|
Aflac, Inc.
|
|
|
191,158
|
|
|
|
8,762,683
|
|
|
|
Chubb Corp.
|
|
|
208,148
|
|
|
|
10,615,548
|
|
|
|
MetLife, Inc.
|
|
|
198,663
|
|
|
|
6,925,392
|
|
|
|
Travelers Companies, Inc. (The)
|
|
|
287,772
|
|
|
|
13,007,294
|
|
|
|
|
|
|
|
|
|
|
|
$
|
45,982,965
|
|
|
|
|
|
|
Internet
Software & Services 0.4%
|
|
Google, Inc.,
Class A(1)
|
|
|
15,941
|
|
|
$
|
4,904,249
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,904,249
|
|
|
|
|
|
|
IT
Services 1.5%
|
|
Accenture, Ltd., Class A
|
|
|
183,638
|
|
|
$
|
6,021,490
|
|
|
|
MasterCard, Inc., Class A
|
|
|
47,565
|
|
|
|
6,798,465
|
|
|
|
Visa, Inc., Class A
|
|
|
110,396
|
|
|
|
5,790,270
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,610,225
|
|
|
|
|
|
|
Life
Sciences Tools & Services 0.4%
|
|
Thermo Fisher Scientific,
Inc.(1)
|
|
|
140,708
|
|
|
$
|
4,793,922
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,793,922
|
|
|
|
|
|
|
Machinery 0.8%
|
|
Danaher Corp.
|
|
|
173,065
|
|
|
$
|
9,797,210
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,797,210
|
|
|
|
|
|
|
Media 2.2%
|
|
Comcast Corp., Class A
|
|
|
915,491
|
|
|
$
|
15,453,488
|
|
|
|
Time Warner, Inc.
|
|
|
528,203
|
|
|
|
5,313,722
|
|
|
|
Vivendi SA
|
|
|
189,955
|
|
|
|
6,191,406
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,958,616
|
|
|
|
|
|
|
Metals
& Mining 2.1%
|
|
BHP Billiton, Ltd. ADR
|
|
|
79,726
|
|
|
$
|
3,420,245
|
|
|
|
Goldcorp, Inc.
|
|
|
601,513
|
|
|
|
18,965,705
|
|
|
|
Nucor Corp.
|
|
|
77,446
|
|
|
|
3,578,005
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,963,955
|
|
|
|
|
|
See
notes to financial statements
5
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
PORTFOLIO OF
INVESTMENTS CONTD
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Shares
|
|
|
Value
|
|
|
|
|
|
|
Multi-Utilities 0.4%
|
|
Public Service Enterprise Group, Inc.
|
|
|
158,208
|
|
|
$
|
4,614,927
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,614,927
|
|
|
|
|
|
|
Oil,
Gas & Consumable Fuels 7.9%
|
|
Anadarko Petroleum Corp.
|
|
|
224,073
|
|
|
$
|
8,638,014
|
|
|
|
Chevron Corp.
|
|
|
318,771
|
|
|
|
23,579,491
|
|
|
|
ConocoPhillips
|
|
|
180,562
|
|
|
|
9,353,112
|
|
|
|
Exxon Mobil Corp.
|
|
|
382,051
|
|
|
|
30,499,131
|
|
|
|
Hess Corp.
|
|
|
186,519
|
|
|
|
10,004,879
|
|
|
|
Occidental Petroleum Corp.
|
|
|
179,602
|
|
|
|
10,774,324
|
|
|
|
XTO Energy, Inc.
|
|
|
116,632
|
|
|
|
4,113,611
|
|
|
|
|
|
|
|
|
|
|
|
$
|
96,962,562
|
|
|
|
|
|
|
Pharmaceuticals 6.3%
|
|
Abbott Laboratories
|
|
|
372,919
|
|
|
$
|
19,902,687
|
|
|
|
Bristol-Myers Squibb Co.
|
|
|
140,673
|
|
|
|
3,270,647
|
|
|
|
Johnson & Johnson
|
|
|
335,793
|
|
|
|
20,090,495
|
|
|
|
Novartis AG ADR
|
|
|
84,897
|
|
|
|
4,224,475
|
|
|
|
Novo-Nordisk A/S, Class B
|
|
|
78,308
|
|
|
|
4,039,431
|
|
|
|
Pfizer, Inc.
|
|
|
528,143
|
|
|
|
9,353,412
|
|
|
|
Roche Holding AG
|
|
|
40,010
|
|
|
|
6,194,233
|
|
|
|
Schering-Plough Corp.
|
|
|
283,696
|
|
|
|
4,831,343
|
|
|
|
Teva Pharmaceutical Industries, Ltd. ADR
|
|
|
115,262
|
|
|
|
4,906,703
|
|
|
|
|
|
|
|
|
|
|
|
$
|
76,813,426
|
|
|
|
|
|
|
Semiconductors
& Semiconductor Equipment 0.8%
|
|
ASML Holding NV
|
|
|
527,234
|
|
|
$
|
9,527,118
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,527,118
|
|
|
|
|
|
|
Software 2.9%
|
|
Microsoft Corp.
|
|
|
1,285,336
|
|
|
$
|
24,986,932
|
|
|
|
Oracle
Corp.(1)
|
|
|
620,422
|
|
|
|
11,000,082
|
|
|
|
|
|
|
|
|
|
|
|
$
|
35,987,014
|
|
|
|
|
|
|
Specialty
Retail 2.0%
|
|
Best Buy Co., Inc.
|
|
|
269,692
|
|
|
$
|
7,581,042
|
|
|
|
Home Depot, Inc.
|
|
|
386,002
|
|
|
|
8,885,766
|
|
|
|
Staples, Inc.
|
|
|
480,157
|
|
|
|
8,604,413
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,071,221
|
|
|
|
|
|
|
Tobacco 1.8%
|
|
Philip Morris International, Inc.
|
|
|
518,256
|
|
|
$
|
22,549,319
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,549,319
|
|
|
|
|
|
|
Wireless
Telecommunication Services 0.4%
|
|
Rogers Communications, Inc., Class B
|
|
|
149,464
|
|
|
$
|
4,495,877
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,495,877
|
|
|
|
|
|
|
|
|
Total
Common Stocks
|
|
|
(identified
cost $1,204,333,622)
|
|
$
|
1,013,895,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put Options
Purchased 15.9%
|
|
|
Number of
|
|
|
Strike
|
|
|
Expiration
|
|
|
|
|
|
|
Description
|
|
Contracts
|
|
|
Price
|
|
|
Date
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500 Index
|
|
|
1,877
|
|
|
$
|
1,185
|
|
|
|
3/21/09
|
|
|
$
|
53,447,575
|
|
|
|
S&P 500 Index
|
|
|
804
|
|
|
|
1,225
|
|
|
|
3/21/09
|
|
|
|
26,077,740
|
|
|
|
S&P 500 Index
|
|
|
1,877
|
|
|
|
1,185
|
|
|
|
6/20/09
|
|
|
|
54,836,555
|
|
|
|
S&P 500 Index
|
|
|
1,998
|
|
|
|
1,200
|
|
|
|
6/20/09
|
|
|
|
61,128,810
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Put Options Purchased
|
|
|
|
|
|
|
(identified
cost $56,145,241)
|
|
$
|
195,490,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term
Investments 4.7%
|
|
|
Interest
|
|
|
|
|
|
|
Description
|
|
(000s
omitted)
|
|
|
Value
|
|
|
|
|
|
Cash Management Portfolio,
0.75%(2)
|
|
$
|
57,522
|
|
|
$
|
57,521,820
|
|
|
|
|
|
|
|
|
Total
Short-Term Investments
|
|
|
(identified
cost $57,521,820)
|
|
$
|
57,521,820
|
|
|
|
|
|
|
|
|
Total
Investments 103.2%
|
|
|
(identified
cost $1,318,000,683)
|
|
$
|
1,266,907,775
|
|
|
|
|
|
See
notes to financial statements
6
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
PORTFOLIO OF
INVESTMENTS CONTD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered Call Options
Written (0.2)%
|
|
|
Number of
|
|
|
Strike
|
|
|
Expiration
|
|
|
|
|
|
|
Description
|
|
Contracts
|
|
|
Price
|
|
|
Date
|
|
|
Value
|
|
|
|
|
|
S&P 500 Index
|
|
|
2,009
|
|
|
$
|
965
|
|
|
|
1/17/09
|
|
|
$
|
(954,275
|
)
|
|
|
S&P 500 Index
|
|
|
4,050
|
|
|
|
975
|
|
|
|
1/17/09
|
|
|
|
(1,053,000
|
)
|
|
|
S&P 500 Index
|
|
|
3,775
|
|
|
|
980
|
|
|
|
1/17/09
|
|
|
|
(615,325
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Covered Call Options Written
|
|
|
|
|
|
|
(premiums
received $11,956,243)
|
|
$
|
(2,622,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets, Less Liabilities (3.0)%
|
|
$
|
(36,808,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Assets 100.0%
|
|
$
|
1,227,476,690
|
|
|
|
|
|
Industry classifications included in the Portfolio of
Investments are unaudited.
ADR - American Depository Receipt
|
|
|
(1)
|
|
Non-income producing security. |
|
(2)
|
|
Affiliated investment company available to Eaton Vance
portfolios and funds which invests in high quality, U.S. dollar
denominated money market instruments. The rate shown is the
annualized
seven-day
yield as of December 31, 2008. |
See
notes to financial statements
7
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
FINANCIAL STATEMENTS
Statement
of Assets and Liabilities
|
|
|
|
|
|
|
As of
December 31, 2008
|
|
|
|
|
|
|
Assets
|
|
Unaffiliated investments, at value (identified cost,
$1,260,478,863)
|
|
$
|
1,209,385,955
|
|
|
|
Affiliated investment, at value (identified cost, $57,521,820)
|
|
|
57,521,820
|
|
|
|
Cash
|
|
|
6,087,294
|
|
|
|
Dividends and interest receivable
|
|
|
1,795,015
|
|
|
|
Interest receivable from affiliated investment
|
|
|
57,478
|
|
|
|
Tax reclaims receivable
|
|
|
100,565
|
|
|
|
|
|
Total assets
|
|
$
|
1,274,948,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
Accrued federal corporate income tax
|
|
$
|
43,353,768
|
|
|
|
Written options outstanding, at value (premiums received,
$11,956,243)
|
|
|
2,622,600
|
|
|
|
Payable for investments purchased
|
|
|
232,375
|
|
|
|
Payable to affiliate for investment adviser fee
|
|
|
1,024,463
|
|
|
|
Payable to affiliate for Trustees fees
|
|
|
9,533
|
|
|
|
Accrued expenses
|
|
|
228,698
|
|
|
|
|
|
Total liabilities
|
|
$
|
47,471,437
|
|
|
|
|
|
Net Assets
|
|
$
|
1,227,476,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources
of Net Assets
|
|
Common shares, $0.01 par value, unlimited number of shares
authorized, 70,805,825
|
|
$
|
708,058
|
|
|
|
shares issued and outstanding
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
1,430,131,028
|
|
|
|
Accumulated distributions in excess of net realized gains
(computed on the basis of identified cost)
|
|
|
(161,744,967
|
)
|
|
|
Accumulated undistributed net investment income
|
|
|
147,930
|
|
|
|
Net unrealized depreciation (computed on the basis of identified
cost)
|
|
|
(41,765,359
|
)
|
|
|
|
|
Net Assets
|
|
$
|
1,227,476,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value
|
|
($1,227,476,690
¸
70,805,825 common shares issued and outstanding)
|
|
$
|
17.34
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
Ended
|
|
|
|
|
|
December 31,
2008
|
|
|
|
|
|
|
Investment
Income
|
|
Dividends (net of foreign taxes, $286,830)
|
|
$
|
23,110,467
|
|
|
|
Interest
|
|
|
48,933
|
|
|
|
Interest income allocated from affiliated investment
|
|
|
1,955,291
|
|
|
|
Expenses allocated from affiliated investment
|
|
|
(325,754
|
)
|
|
|
|
|
Total investment income
|
|
$
|
24,788,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
Investment adviser fee
|
|
$
|
12,918,013
|
|
|
|
Trustees fees and expenses
|
|
|
29,315
|
|
|
|
Custodian fee
|
|
|
306,235
|
|
|
|
Printing and postage
|
|
|
145,076
|
|
|
|
Legal and accounting services
|
|
|
109,402
|
|
|
|
Transfer and dividend disbursing agent fees
|
|
|
18,627
|
|
|
|
Miscellaneous
|
|
|
91,341
|
|
|
|
|
|
Total expenses
|
|
$
|
13,618,009
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
11,170,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized
and Unrealized Gain (Loss)
|
|
Net realized gain (loss)
|
|
|
|
|
|
|
Investment transactions (identified cost basis), including
|
|
|
|
|
|
|
federal corporate income tax of $43,353,768 on long-term capital
gains retained
|
|
$
|
(79,727,287
|
)
|
|
|
Written options
|
|
|
136,609,223
|
|
|
|
Foreign currency transactions
|
|
|
(48,697
|
)
|
|
|
Disposal of investment in violation of restrictions
|
|
|
14,487
|
|
|
|
|
|
Net realized gain
|
|
$
|
56,847,726
|
|
|
|
|
|
Change in unrealized appreciation (depreciation)
|
|
|
|
|
|
|
Investments (identified cost basis)
|
|
$
|
(132,615,019
|
)
|
|
|
Written options
|
|
|
3,468,446
|
|
|
|
Foreign currency
|
|
|
(6,094
|
)
|
|
|
|
|
Net change in unrealized appreciation (depreciation)
|
|
$
|
(129,152,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized loss
|
|
$
|
(72,304,941
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in net assets from operations
|
|
$
|
(61,134,013
|
)
|
|
|
|
|
See
notes to financial statements
8
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
FINANCIAL
STATEMENTS CONTD
Statements
of Changes in Net Assets
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease)
|
|
Year Ended
|
|
|
Period Ended
|
|
|
|
in Net Assets
|
|
December 31,
2008
|
|
|
December 31,
2007(1)
|
|
|
|
|
From operations
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
11,170,928
|
|
|
$
|
7,264,785
|
|
|
|
Net realized gain from investment transactions, written options,
foreign currency transactions and disposal of investment in
violation of restrictions
|
|
|
56,847,726
|
|
|
|
1,524,119
|
|
|
|
Net change in unrealized appreciation (depreciation) of
investments, written options and foreign currency
|
|
|
(129,152,667
|
)
|
|
|
87,387,308
|
|
|
|
|
|
Net increase (decrease) in net assets from operations
|
|
$
|
(61,134,013
|
)
|
|
$
|
96,176,212
|
|
|
|
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
From net investment income
|
|
$
|
(11,532,334
|
)
|
|
$
|
(6,705,729
|
)
|
|
|
From net realized gain
|
|
|
(114,987,293
|
)
|
|
|
(24,886,521
|
)
|
|
|
|
|
Total distributions
|
|
$
|
(126,519,627
|
)
|
|
$
|
(31,592,250
|
)
|
|
|
|
|
Capital share transactions
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of shares
|
|
$
|
|
|
|
$
|
1,340,820,000
|
(2)
|
|
|
Reinvestment of distributions
|
|
|
10,956,109
|
|
|
|
|
|
|
|
Offering costs
|
|
|
75,643
|
|
|
|
(1,405,384
|
)
|
|
|
|
|
Net increase in net assets from capital share transactions
|
|
$
|
11,031,752
|
|
|
$
|
1,339,414,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets
|
|
$
|
(176,621,888
|
)
|
|
$
|
1,403,998,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Assets
|
|
At beginning of period
|
|
$
|
1,404,098,578
|
|
|
$
|
100,000
|
|
|
|
|
|
At end of period
|
|
$
|
1,227,476,690
|
|
|
$
|
1,404,098,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
undistributed
net investment income
included in net assets
|
|
At end of period
|
|
$
|
147,930
|
|
|
$
|
558,420
|
|
|
|
|
|
|
|
(1)
|
For the period from
the start of business, July 31, 2007, to December 31,
2007.
|
|
(2)
|
Proceeds from sale
of shares are net of sales load paid of $63,180,000.
|
See
notes to financial statements
9
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
FINANCIAL
STATEMENTS CONTD
Financial
Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Period Ended
|
|
|
|
|
|
December 31,
2008
|
|
|
December 31,
2007(1)
|
|
|
|
|
Net asset value Beginning of period
|
|
$
|
20.000
|
|
|
$
|
19.100(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
Net investment
income(3)
|
|
$
|
0.159
|
|
|
$
|
0.106
|
|
|
|
Net realized and unrealized gain (loss)
|
|
|
(1.020
|
)(4)
|
|
|
1.265
|
|
|
|
|
|
Total income (loss) from operations
|
|
$
|
(0.861
|
)
|
|
$
|
1.371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
distributions
|
|
From net investment income
|
|
$
|
(0.164
|
)
|
|
$
|
(0.096
|
)
|
|
|
From net realized gain
|
|
|
(1.636
|
)
|
|
|
(0.354
|
)
|
|
|
|
|
Total distributions
|
|
$
|
(1.800
|
)
|
|
$
|
(0.450
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering costs charged to paid-in
capital(3)
|
|
$
|
0.001
|
|
|
$
|
(0.021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value End of period
|
|
$
|
17.340
|
|
|
$
|
20.000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value End of period
|
|
$
|
17.980
|
|
|
$
|
18.700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Return on Net Asset
Value(5)
|
|
|
(1.17
|
)%(9)
|
|
|
7.38
|
%(6)(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Return on Market
Value(5)
|
|
|
9.60
|
%(9)
|
|
|
0.40
|
%(6)(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental
Data
|
|
Net assets, end of period (000s omitted)
|
|
$
|
1,227,477
|
|
|
$
|
1,404,099
|
|
|
|
Ratios (As a percentage of average daily net assets):
|
|
|
|
|
|
|
|
|
|
|
Expenses before custodian fee
reduction(7)
|
|
|
1.06
|
%
|
|
|
1.08
|
%(8)
|
|
|
Net investment income
|
|
|
0.85
|
%
|
|
|
1.29
|
%(8)
|
|
|
Portfolio Turnover
|
|
|
100
|
%
|
|
|
30
|
%(10)
|
|
|
|
|
|
|
|
(1)
|
|
For the period from the start of business, July 31, 2007,
to December 31, 2007. |
|
(2)
|
|
Net asset value at beginning of period reflects the deduction of
the sales load of $0.90 per share paid by the shareholder from
the $20.00 offering price. |
|
(3)
|
|
Computed using average shares outstanding. |
|
(4)
|
|
Includes per share federal corporate income tax on long-term
capital gains retained by the Fund of $(0.612). |
|
(5)
|
|
Returns are historical and are calculated by determining the
percentage change in net asset value or market value with all
distributions reinvested. During the year ended
December 31, 2008, the Fund elected to retain a portion of
its realized long-term gains and pay the required federal
corporate income tax on such amount. The total returns for the
year ended December 31, 2008, presented in the table,
include the economic benefit to common shareholders of the tax
credit or refund available to them, which equaled their pro rata
share of the tax paid by the Fund. If this benefit were not
included in the returns, the Total Investment Return on Net
Asset Value would have been (4.54)% and the Total Investment
Return on Market Value would have been 5.87%. |
|
(6)
|
|
Total investment return on net asset value is calculated
assuming a purchase at the offering price of $20.00 less the
sales load of $0.90 per share paid by the shareholder on the
first day and a sale at the net asset value on the last day of
the period reported with all distributions reinvested. Total
investment return on market value is calculated assuming a
purchase at the offering price of $20.00 less the sales load of
$0.90 per share paid by the shareholder on the first day and a
sale at the current market price on the last day of the period
reported with all distributions reinvested. |
|
(7)
|
|
Excludes the effect of custody fee credits, if any, of less than
0.005%. |
|
(8)
|
|
Annualized. |
|
(9)
|
|
During the year ended December 31, 2008, the Fund realized
a gain on the disposal of an investment security which did not
meet investment guidelines. The gain was less than $0.001 per
share and had no effect on total return for the year ended
December 31, 2008. |
|
(10)
|
|
Not annualized. |
See
notes to financial statements
10
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
NOTES TO FINANCIAL STATEMENTS
1 Significant
Accounting Policies
Eaton Vance Risk-Managed Diversified Equity Income Fund (the
Fund) is a Massachusetts business trust registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as a
diversified, closed-end management investment company. The
Funds primary investment objective is to provide current
income and gains, with a secondary objective of capital
appreciation. The Fund pursues its investment objectives by
investing primarily in a portfolio of common stocks and index
put options. Under normal market conditions, the Fund seeks to
generate current earnings in part by employing an options
strategy of writing put options on individual stocks and index
call options with respect to a portion of its common stock
portfolio.
The following is a summary of significant accounting policies of
the Fund. The policies are in conformity with accounting
principles generally accepted in the United States of America.
A Investment
Valuation Equity securities listed on a U.S.
securities exchange generally are valued at the last sale price
on the day of valuation or, if no sales took place on such date,
at the mean between the closing bid and asked prices therefore
on the exchange where such securities are principally traded.
Equity securities listed on the NASDAQ Global or Global Select
Market generally are valued at the NASDAQ official closing
price. Unlisted or listed securities for which closing sales
prices or closing quotations are not available are valued at the
mean between the latest available bid and asked prices or, in
the case of preferred equity securities that are not listed or
traded in the over-the-counter market, by an independent pricing
service. Exchange-traded options are valued at the last sale
price for the day of valuation as quoted on any exchange on
which the options are traded or, in the absence of sales on such
date, at the mean between the closing bid and asked prices
therefore.
Over-the-counter
options are valued based on broker quotations. Short-term debt
securities with a remaining maturity of sixty days or less are
valued at amortized cost, which approximates market value. If
short-term debt securities are acquired with a remaining
maturity of more than sixty days, they will be valued by a
pricing service. Foreign securities and currencies are valued in
U.S. dollars, based on foreign currency exchange rate quotations
supplied by an independent quotation service. The independent
service uses a proprietary model to determine the exchange rate.
Inputs to the model include reported trades and implied bid/ask
spreads. The daily valuation of exchange-traded foreign
securities generally is determined as of the close of trading on
the principal exchange on which such securities trade. Events
occurring after the close of trading on foreign exchanges may
result in adjustments to the valuation of foreign securities to
more accurately reflect their fair value as of the close of
regular trading on the New York Stock Exchange. When valuing
foreign equity securities that meet certain criteria, the
Trustees have approved the use of a fair value service that
values such securities to reflect market trading that occurs
after the close of the applicable foreign markets of comparable
securities or other instruments that have a strong correlation
to the fair-valued securities. Investments for which valuations
or market quotations are not readily available are valued at
fair value using methods determined in good faith by or at the
direction of the Trustees of the Fund considering relevant
factors, data and information including the market value of
freely tradable securities of the same class in the principal
market on which such securities are normally traded.
The Fund may invest in Cash Management Portfolio (Cash
Management), an affiliated investment company managed by Boston
Management and Research (BMR), a subsidiary of Eaton Vance
Management (EVM). Cash Management values its investment
securities utilizing the amortized cost valuation technique
permitted by
Rule 2a-7
of the 1940 Act, pursuant to which Cash Management must comply
with certain conditions. This technique involves initially
valuing a portfolio security at its cost and thereafter assuming
a constant amortization to maturity of any discount or premium.
If amortized cost is determined not to approximate fair value,
Cash Management may value its investment securities based on
available market quotations provided by a pricing service.
B Investment
Transactions Investment transactions for
financial statement purposes are accounted for on a trade date
basis. Realized gains and losses on investments sold are
determined on the basis of identified cost.
C Income
Dividend income is recorded on the ex-dividend date for
dividends received in cash
and/or
securities. However, if the ex-dividend date has passed, certain
dividends from foreign securities are recorded as the Fund is
informed of the ex-dividend date. Withholding taxes on foreign
dividends and capital gains have been provided for in accordance
with the Funds understanding of the applicable
countries tax rules and rates. Interest income is recorded
on the basis of interest accrued, adjusted for amortization of
premium or accretion of discount.
D Federal
Taxes The Funds policy is to comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies and to distribute to shareholders
each year substantially all of its net investment income, and
all or substantially all of its net realized capital gains.
Alternatively, the Fund may choose to retain all or a portion of
its net capital gains and pay a federal corporate income tax on
such amount retained. For the year ended December 31, 2008,
the Fund accrued a federal corporate income tax of $43,353,768
on realized capital gains of $123,867,909 that it retained.
11
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
NOTES TO FINANCIAL
STATEMENTS CONTD
Additionally, at December 31, 2008, the Fund had net
capital losses of $148,580,880 attributable to security
transactions incurred after October 31, 2008. These net
capital losses are treated as arising on the first day of the
Funds taxable year ending December 31, 2009.
As of December 31, 2008, the Fund had no uncertain tax
provisions that would require financial statement recognition,
de-recognition, or disclosure. Each of the Funds federal
tax returns filed since the start of business on July 31,
2007 to December 31, 2008 remains subject to examination by
the Internal Revenue Service.
E Expense
Reduction State Street Bank and
Trust Company (SSBT) serves as custodian of the Fund.
Pursuant to the custodian agreement, SSBT receives a fee reduced
by credits, which are determined based on the average daily cash
balance the Fund maintains with SSBT. All credit balances, if
any, used to reduce the Funds custodian fees are reported
as a reduction of expenses in the Statement of Operations.
F Organization
and Offering Costs Costs incurred by the Fund
in connection with its organization are expensed. Costs incurred
by the Fund in connection with the offering of its common shares
are recorded as a reduction of additional paid-in capital.
G Foreign
Currency Translation Investment valuations,
other assets, and liabilities initially expressed in foreign
currencies are translated each business day into U.S. dollars
based upon current exchange rates. Purchases and sales of
foreign investment securities and income and expenses
denominated in foreign currencies are translated into U.S.
dollars based upon currency exchange rates in effect on the
respective dates of such transactions. Recognized gains or
losses on investment transactions attributable to changes in
foreign currency exchange rates are recorded for financial
statement purposes as net realized gains and losses on
investments. That portion of unrealized gains and losses on
investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
H Use
of Estimates The preparation of the financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial
statements and the reported amounts of income and expense during
the reporting period. Actual results could differ from those
estimates.
I Indemnifications
Under the Funds organizational documents, its
officers and Trustees may be indemnified against certain
liabilities and expenses arising out of the performance of their
duties to the Fund, and shareholders are indemnified against
personal liability for the obligations of the Fund.
Additionally, in the normal course of business, the Fund enters
into agreements with service providers that may contain
indemnification clauses. The Funds maximum exposure under
these arrangements is unknown as this would involve future
claims that may be made against the Fund that have not yet
occurred.
J Written
Options Upon the writing of a call or a put
option, the premium received by the Fund is included in the
Statement of Assets and Liabilities as a liability. The amount
of the liability is subsequently
marked-to-market
to reflect the current market value of the option written, in
accordance with the Funds policies on investment
valuations discussed above. Premiums received from writing
options which expire are treated as realized gains. Premiums
received from writing options which are exercised or are closed
are added to or offset against the proceeds or amount paid on
the transaction to determine the realized gain or loss. If a put
option on a security is exercised, the premium reduces the cost
basis of the securities purchased by the Fund. The Fund, as a
writer of an option, may have no control over whether the
underlying securities or other assets may be sold (call) or
purchased (put) and, as a result, bears the market risk of an
unfavorable change in the price of the securities or other
assets underlying the written option. The Fund may also bear the
risk of not being able to enter into a closing transaction if a
liquid secondary market does not exist.
K Purchased
Options Upon the purchase of a call or put
option, the premium paid by the Fund is included in the
Statement of Assets and Liabilities as an investment. The amount
of the investment is subsequently
marked-to-market
to reflect the current market value of the option purchased, in
accordance with the Funds policies on investment
valuations discussed above. If an option which the Fund had
purchased expires on the stipulated expiration date, the Fund
will realize a loss in the amount of the cost of the option. If
the Fund enters into a closing sale transaction, the Fund will
realize a gain or loss, depending on whether the sales proceeds
from the closing sale transaction are greater or less than the
cost of the option. If the Fund exercises a put option, it will
realize a gain or loss from the sale of the underlying security,
and the proceeds from such sale will be decreased by the premium
originally paid. If the Fund exercises a call option, the cost
of the security which the Fund purchases upon exercise will be
increased by the premium originally paid. The risk associated
with purchasing options is limited to the premium originally
paid.
12
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
NOTES TO FINANCIAL
STATEMENTS CONTD
2 Distributions
to Shareholders
The Fund intends to make quarterly distributions from its cash
available for distribution, which consists of the Funds
dividends and interest income after payment of Fund expenses,
net option premiums and net realized and unrealized gains on
stock investments. At least annually, the Fund intends to
distribute all or substantially all of its net realized capital
gains, if any. Distributions are recorded on the ex-dividend
date. The Fund distinguishes between distributions on a tax
basis and a financial reporting basis. Accounting principles
generally accepted in the United States of America require that
only distributions in excess of tax basis earnings and profits
be reported in the financial statements as a return of capital.
Permanent differences between book and tax accounting relating
to distributions are reclassified to paid-in capital. For tax
purposes, distributions from short-term capital gains are
considered to be from ordinary income. Distributions in any year
may include a substantial return of capital component.
The tax character of distributions declared for the year ended
December 31, 2008 and the period from the start of
business, July 31, 2007, to December 31, 2007 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Period Ended
|
|
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
|
|
Distributions declared from:
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
33,724,663
|
|
|
$
|
12,789,566
|
|
|
|
Long-term capital gains
|
|
$
|
92,794,964
|
|
|
$
|
18,802,684
|
|
|
|
During the year ended December 31, 2008, accumulated
distributions in excess of net realized gains was increased by
$80,243,634, accumulated undistributed net investment income was
decreased by $49,084 and paid-in capital was increased by
$80,292,718 due to differences between book and tax accounting,
primarily for foreign currency gain (loss), distributions from
real estate investment trusts and retention of and tax paid on
long-term capital gains. These reclassifications had no effect
on the net assets or net asset value per share of the Fund.
As of December 31, 2008, the components of distributable
earnings (accumulated losses) and unrealized appreciation
(depreciation) on a tax basis were as follows:
|
|
|
|
|
|
|
Undistributed long-term capital gains
|
|
$
|
604,782
|
|
|
|
Net unrealized depreciation
|
|
$
|
(55,386,298
|
)
|
|
|
Post October capital losses
|
|
$
|
(148,580,880
|
)
|
|
|
The differences between components of distributable earnings
(accumulated losses) on a tax basis and the amounts reflected in
the Statement of Assets and Liabilities are primarily due to
wash sales, written options contracts and investments in
partnerships.
3 Investment
Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by EVM as compensation for
management and investment advisory services rendered to the
Fund. The fee is computed at an annual rate of 1.00% of the
Funds average daily gross assets and is payable monthly.
Gross assets as referred to herein represent net assets plus
obligations attributable to investment leverage, if any. The
portion of the adviser fee payable by Cash Management on the
Funds investment of cash therein is credited against the
Funds adviser fee. For the year ended December 31,
2008 the Funds adviser fee totaled $13,227,813 of which
$309,800 was allocated from Cash Management and $12,918,013 was
paid or accrued directly by the Fund. Pursuant to a
sub-advisory
agreement, EVM has delegated the investment management of the
Funds options strategy to Rampart Investment Management
Company, Inc. (Rampart). EVM pays Rampart a portion of its
advisory fee for
sub-advisory
services provided to the Fund. EVM also serves as administrator
of the Fund, but receives no compensation.
Except for Trustees of the Fund who are not members of
EVMs organization, officers and Trustees receive
remuneration for their services to the Fund out of the
investment adviser fee. Trustees of the Fund who are not
affiliated with EVM may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of
the Trustees Deferred Compensation Plan. For the year ended
December 31, 2008, no significant amounts have been
deferred. Certain officers and Trustees of the Fund are officers
of EVM.
4 Purchases
and Sales of Investments
Purchases and sales of investments, other than short-term
obligations, aggregated $1,373,405,820 and $1,170,850,713,
respectively, for the year ended December 31, 2008. During
the year ended December 31, 2008, the Fund realized a gain
of $14,487 due to the sale of an investment security not meeting
investment guidelines.
5 Common
Shares of Beneficial Interest
The Fund may issue common shares pursuant to its dividend
reinvestment plan. Transactions in common shares were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Period Ended
|
|
|
|
|
|
December 31,
2008
|
|
|
December 31,
2007(1)
|
|
|
|
|
Sales
|
|
|
|
|
|
|
70,205,000
|
|
|
|
Issued to shareholders electing to receive payments of
distributions in Fund shares
|
|
|
600,825
|
|
|
|
|
|
|
|
|
|
Net increase
|
|
|
600,825
|
|
|
|
70,205,000
|
|
|
|
|
|
|
|
|
(1)
|
|
For the period from the start of business, July 31, 2007,
to December 31, 2007. |
13
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
NOTES TO FINANCIAL
STATEMENTS CONTD
6 Federal
Income Tax Basis of Investments
The cost and unrealized appreciation (depreciation) of
investments of the Fund at December 31, 2008, as determined
on a federal income tax basis, were as follows:
|
|
|
|
|
|
|
Aggregate cost
|
|
$
|
1,331,621,622
|
|
|
|
|
|
Gross unrealized appreciation
|
|
$
|
5,050,202
|
|
|
|
Gross unrealized depreciation
|
|
|
(69,764,049
|
)
|
|
|
|
|
Net unrealized depreciation
|
|
$
|
(64,713,847
|
)
|
|
|
|
|
7 Financial
Instruments
The Fund may trade in financial instruments with off-balance
sheet risk in the normal course of its investing activities.
These financial instruments may include written options and may
involve, to a varying degree, elements of risk in excess of the
amounts recognized for financial statement purposes. The
notional or contractual amounts of these instruments represent
the investment the Fund has in particular classes of financial
instruments and does not necessarily represent the amounts
potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all
related and offsetting transactions are considered. A summary of
written call options at December 31, 2008 is included in
the Portfolio of Investments.
Written call and put options activity for the year ended
December 31, 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Premiums
|
|
|
|
|
|
Contracts
|
|
|
Received
|
|
|
|
|
Outstanding, beginning of year
|
|
|
70,117
|
|
|
$
|
21,506,649
|
|
|
|
Options written
|
|
|
279,478
|
|
|
|
243,628,281
|
|
|
|
Options terminated in closing purchase transactions
|
|
|
(268,041
|
)
|
|
|
(244,582,593
|
)
|
|
|
Options exercised
|
|
|
(14,486
|
)
|
|
|
(1,566,225
|
)
|
|
|
Options expired
|
|
|
(57,234
|
)
|
|
|
(7,029,869
|
)
|
|
|
|
|
Outstanding, end of year
|
|
|
9,834
|
|
|
$
|
11,956,243
|
|
|
|
|
|
All of the assets of the Fund are subject to segregation to
satisfy the requirements of the escrow agent. At
December 31, 2008, the Fund had sufficient cash
and/or
securities to cover commitments under these contracts.
8 Fair
Value Measurements
The Fund adopted Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards No. 157
(FAS 157), Fair Value Measurements, effective
January 1, 2008. FAS 157 established a three-tier
hierarchy to prioritize the assumptions, referred to as inputs,
used in valuation techniques to measure fair value. The
three-tier hierarchy of inputs is summarized in the three broad
levels listed below.
|
|
|
|
|
Level 1 quoted prices in active markets for
identical investments
|
|
|
|
Level 2 other significant observable inputs
(including quoted prices for similar investments, interest
rates, prepayment speeds, credit risk, etc.)
|
|
|
|
Level 3 significant unobservable inputs
(including a funds own assumptions in determining the fair
value of investments)
|
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing
in those securities.
At December 31, 2008, the inputs used in valuing the
Funds investments, which are carried at value, were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in
|
|
|
Other
Financial
|
|
|
|
|
|
Valuation
Inputs
|
|
Securities
|
|
|
Instruments*
|
|
|
|
|
Level 1
|
|
Quoted Prices
|
|
$
|
1,175,765,805
|
|
|
$
|
(2,622,600
|
)
|
|
|
Level 2
|
|
Other Significant Observable Inputs
|
|
|
91,141,970
|
|
|
|
|
|
|
|
Level 3
|
|
Significant Unobservable Inputs
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
1,266,907,775
|
|
|
$
|
(2,622,600
|
)
|
|
|
|
|
|
|
|
*
|
|
Other financial instruments include written call options. |
The Fund held no investments or other financial instruments as
of December 31, 2007 whose fair value was determined using
Level 3 inputs.
9 Recently
Issued Accounting Pronouncement
In March 2008, the FASB issued Statement of Financial
Accounting Standards No. 161 (FAS 161),
Disclosures about Derivative Instruments and Hedging
Activities. FAS 161 requires enhanced disclosures
about an entitys derivative and hedging activities,
including qualitative disclosures about the objectives and
strategies for using derivatives, quantitative disclosures about
fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk related
contingent features in derivative instruments. FAS 161 is
effective for fiscal years and interim periods beginning after
November 15, 2008. Management is currently evaluating the
impact the adoption of FAS 161 will have on the Funds
financial statement disclosures.
14
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Trustees
and Shareholders of Eaton Vance Risk-Managed Diversified Equity
Income Fund:
We have audited the accompanying statement of assets and
liabilities of Eaton Vance Risk-Managed Diversified Equity
Income Fund (the Fund), including the portfolio of
investments, as of December 31, 2008, the related statement
of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for the year
then ended and the period from the start of business,
July 31, 2007, to December 31, 2007. These financial
statements and financial highlights are the responsibility of
the Funds management. Our responsibility is to express an
opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Funds
internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. Our
procedures included confirmation of securities owned as of
December 31, 2008, by correspondence with the custodian and
brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Eaton Vance Risk-Managed
Diversified Equity Income Fund as of December 31, 2008, the
results of its operations for the year then ended, and the
changes in its net assets and the financial highlights for the
year then ended and the period from the start of business,
July 31, 2007, to December 31, 2007, in conformity
with accounting principles generally accepted in the United
States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 16, 2009
15
Eaton Vance
Risk-Managed Diversified Equity Income
Fund as
of December 31, 2008
FEDERAL TAX
INFORMATION (Unaudited)
The
Form 1099-DIV
you received in January 2009 showed the tax status of all
distributions paid to your account in calendar 2008.
Shareholders are advised to consult their own tax adviser with
respect to the tax consequences of their investment in the Fund.
As required by the Internal Revenue Code regulations,
shareholders must be notified within 60 days of the
Funds fiscal year end regarding the status of qualified
dividend income for individuals, the dividends received
deduction for corporations, and capital gain dividends.
Qualified Dividend Income. The Fund designates
approximately $21,552,313, or up to the maximum amount of such
dividends allowable pursuant to the Internal Revenue Code, as
qualified dividend income eligible for the reduced tax rate of
15%.
Dividends Received Deduction. Corporate shareholders
are generally entitled to take the dividends received deduction
on the portion of the Funds dividend distribution that
qualifies under tax law. For the Funds fiscal 2008
ordinary income dividends, 60.80% qualifies for the corporate
dividends received deduction.
Capital Gain Dividends. The Fund designates
$92,794,964 as a capital gain dividend.
16
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
DIVIDEND REINVESTMENT PLAN
The Fund offers a dividend reinvestment plan (the Plan) pursuant
to which shareholders automatically have dividends and capital
gains distributions reinvested in common shares (the Shares) of
the Fund unless they elect otherwise through their investment
dealer. On the distribution payment date, if the net asset value
per Share is equal to or less than the market price per Share
plus estimated brokerage commissions, then new Shares will be
issued. The number of Shares shall be determined by the greater
of the net asset value per Share or 95% of the market price.
Otherwise, Shares generally will be purchased on the open market
by the Plan Agent. Distributions subject to income tax (if any)
are taxable whether or not shares are reinvested.
If your shares are in the name of a brokerage firm, bank, or
other nominee, you can ask the firm or nominee to participate in
the Plan on your behalf. If the nominee does not offer the Plan,
you will need to request that your shares be re-registered in
your name with the Funds transfer agent, American Stock
Transfer & Trust Company, or you will not be able
to participate.
The Plan Agents service fee for handling distributions
will be paid by the Fund. Each participant will be charged their
pro rata share of brokerage commissions on all open-market
purchases.
Plan participants may withdraw from the Plan at any time by
writing to the Plan Agent at the address noted on the following
page. If you withdraw, you will receive shares in your name for
all Shares credited to your account under the Plan. If a
participant elects by written notice to the Plan Agent to have
the Plan Agent sell part or all of his or her Shares and remit
the proceeds, the Plan Agent is authorized to deduct a $5.00 fee
plus brokerage commissions from the proceeds.
If you wish to participate in the Plan and your shares are held
in your own name, you may complete the form on the following
page and deliver it to the Plan Agent.
Any inquires regarding the Plan can be directed to the Plan
Agent, American Stock Transfer & Trust Company,
at 1-866-439-6787.
17
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
APPLICATION FOR PARTICIPATION IN
DIVIDEND REINVESTMENT PLAN
This form is for shareholders who hold their common shares in
their own names. If your common shares are held in the name of a
brokerage firm, bank, or other nominee, you should contact your
nominee to see if it will participate in the Plan on your
behalf. If you wish to participate in the Plan, but your
brokerage firm, bank, or nominee is unable to participate on
your behalf, you should request that your common shares be
re-registered in your own name which will enable your
participation in the Plan.
The following authorization and appointment is given with the
understanding that I may terminate it at any time by terminating
my participation in the Plan as provided in the terms and
conditions of the Plan.
Please print exact name on account:
Shareholder
signature
Date
Shareholder
signature
Date
Please sign exactly as your common shares are registered. All
persons whose names appear on the share certificate must sign.
YOU SHOULD NOT RETURN THIS FORM IF YOU WISH TO RECEIVE
YOUR DIVIDENDS AND DISTRIBUTIONS IN CASH. THIS IS NOT A
PROXY.
This authorization form, when signed, should be mailed to the
following address:
Eaton Vance Risk-Managed Diversified Equity Income Fund
c/o American Stock Transfer & Trust Company
P.O. Box 922
Wall Street Station
New York, NY
10269-0560
Number of
Employees
The Fund is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company and
has no employees.
Number of
Shareholders
As of December 31, 2008, our records indicate that there
are 110 registered shareholders and approximately 50,000
shareholders owning the Fund shares in street name, such as
through brokers, banks, and financial intermediaries.
If you are a street name shareholder and wish to receive our
reports directly, which contain important information about the
Fund, please write or call:
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-262-1122
New York
Stock Exchange symbol
The New York Stock Exchange symbol is ETJ.
18
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
BOARD OF TRUSTEES ANNUAL
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT
Overview
of the Contract Review Process
The Investment Company Act of 1940, as amended (the 1940
Act), provides, in substance, that in order for a fund to
enter into an investment advisory agreement with an investment
adviser, the funds Board of Trustees, including a majority
of the Trustees who are not interested persons of
the fund (Independent Trustees), must approve the
agreement and its terms at an in-person meeting called for the
purpose of considering such approval.
At a meeting of the Boards of Trustees (each a
Board) of the Eaton Vance group of mutual funds (the
Eaton Vance Funds) held on April 23, 2007, the
Board, including a majority of the Independent Trustees, voted
to approve the investment advisory agreement of the Eaton Vance
Risk-Managed Diversified Equity Income Fund (the
Fund) with Eaton Vance Management (the
Adviser) and the
sub-advisory
agreement with Rampart Investment Management Company, Inc. (the
Sub-adviser).
The Board reviewed information furnished for the April 2007
meeting as well as information previously furnished with respect
to the approval of other investment advisory agreements for
other Eaton Vance Funds. Such information included, among other
things, the following:
Information
about Fees and Expenses
|
|
|
|
|
The advisory and related fees to be paid by the Fund and the
anticipated expense ratio of the Fund;
|
|
|
Comparative information concerning fees charged by the Adviser
and
Sub-adviser
for managing other mutual funds and institutional accounts using
investment strategies and techniques similar to those to be used
in managing the Fund, and concerning fees charged by other
advisers for managing funds similar to the Fund;
|
Information
about Portfolio Management
|
|
|
|
|
Descriptions of the investment management services to be
provided to the Fund, including the investment strategies and
processes to be employed;
|
|
|
Information concerning the allocation of brokerage and the
benefits expected to be received by the Adviser as a result of
brokerage allocation for the Fund, including information
concerning the acquisition of research through soft
dollar benefits received in connection with the
Funds brokerage, and the implementation of the soft dollar
reimbursement program established with respect to the Eaton
Vance Funds;
|
|
|
The procedures and processes to be used to determine the fair
value of Fund assets and actions to be taken to monitor and test
the effectiveness of such procedures and processes;
|
Information
about the Adviser and
Sub-adviser
|
|
|
|
|
Reports detailing the financial results and condition of the
Adviser and
Sub-adviser;
|
|
|
Descriptions of the qualifications, education and experience of
the individual investment professionals whose responsibilities
include portfolio management and investment research for the
Fund, and information relating to their compensation and
responsibilities with respect to managing other mutual funds and
investment accounts;
|
|
|
Copies of the Codes of Ethics of the Adviser and its affiliates
and the
Sub-adviser,
together with information relating to compliance with and the
administration of such codes;
|
|
|
Copies of or descriptions of the Advisers and
Sub-advisers
proxy voting policies and procedures;
|
|
|
Information concerning the resources devoted to compliance
efforts undertaken by the Adviser and its affiliates, on behalf
of the Eaton Vance Funds (including descriptions of various
compliance programs) and their record of compliance with
investment policies and restrictions, including policies with
respect to market-timing, late trading and selective portfolio
disclosure, and with policies on personal securities
transactions;
|
|
|
Descriptions of the business continuity and disaster recovery
plans of the Adviser and its affiliates and of the
Sub-adviser;
|
Other
Relevant Information
|
|
|
|
|
Information concerning the nature, cost and character of the
administrative and other non-investment management services to
be provided by Eaton Vance Management and its affiliates;
|
|
|
Information concerning management of the relationship with the
custodian, subcustodians and Fund accountants by the Adviser
(which is also the administrator); and
|
|
|
The terms of the advisory and
sub-advisory
agreements of the Fund.
|
Results
of the Process
Based on its consideration of the foregoing, and such other
information as it deemed relevant, including the factors and
conclusions described below, the Board concluded that the terms
of the Funds investment advisory agreements with the
Adviser and
Sub-adviser,
including their fee structures, are in the interests of
shareholders and, therefore, the Board, including a majority of
the Independent Trustees, voted to approve the advisory and
sub-advisory
agreements for the Fund.
19
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
BOARD OF TRUSTEES ANNUAL
APPROVAL OF THE INVESTMENT ADVISORY
AGREEMENT CONTD
Nature,
Extent and Quality of Services
In considering whether to approve the investment advisory and
sub-advisory
agreements of the Fund, the Board evaluated the nature, extent
and quality of services to be provided to the Fund by the
Adviser and
Sub-adviser.
The Board considered the Advisers and
Sub-advisers
management capabilities and investment process with respect to
the types of investments to be held by the Fund, including the
education, experience and number of its investment professionals
and other personnel who provide portfolio management, investment
research, and similar services to the Fund, and whose
responsibilities include supervising the
Sub-adviser
and coordinating activities in implementing the Funds
investment strategy.
In particular, the Board evaluated the abilities and experience
of such investment personnel in analyzing factors such as tax
efficiency and special considerations relevant to investing in
stocks and selling call options on various indexes, including
the S&P 500 Index. With respect to Rampart, the Board
considered Ramparts business reputation and its options
strategy and its past experience in implementing this strategy.
The Board reviewed the compliance programs of the Adviser,
Sub-adviser
and relevant affiliates thereof. Among other matters, the Board
considered compliance and reporting matters relating to personal
trading by investment personnel, selective disclosure of
portfolio holdings, late trading, frequent trading, portfolio
valuation, business continuity and the allocation of investment
opportunities.
The Board also evaluated the responses of the Adviser and its
affiliates to requests from regulatory authorities such as the
Securities and Exchange Commission and the National
Association of Securities Dealers.
The Board considered shareholder and other administrative
services provided or managed by Eaton Vance Management and its
affiliates, including transfer agency and accounting services.
The Board evaluated the benefits to shareholders of investing in
a fund that is a part of a large family of funds, including the
ability, in many cases, to exchange an investment among
different funds without incurring additional sales charges.
After consideration of the foregoing factors, among others, the
Board concluded that the nature, extent and quality of services
to be provided by the Adviser, taken as a whole, are appropriate
and consistent with the terms of the investment advisory
agreement.
Management
Fees and Expenses
The Board reviewed contractual investment advisory fee rates,
including any administrative fee rates, to be payable by the
Fund, (referred to collectively as management fees).
As part of its review, the Board considered the Funds
management fees and estimated expense ratio for a one-year
period.
After reviewing the foregoing information, and in light of the
nature, extent and quality of the services to be provided by the
Adviser, the Board concluded with respect to the Fund that the
management fees proposed to be charged to the Fund for advisory
and related services and the total expense ratio of the Fund are
reasonable.
Profitability
The Board reviewed the level of profits projected to be realized
by the Adviser and relevant affiliates in providing investment
advisory and administrative services to the Fund. The Board
considered the level of profits expected to be realized without
regard to revenue sharing or other payments by the Adviser and
its affiliates to third parties in respect of distribution
services. The Board also considered other direct or indirect
benefits expected to be received by the Adviser and its
affiliates in connection with its relationship with the Fund.
The Board also concluded that, in light of its role as a
sub-adviser
not affiliated with the Adviser, the
Sub-advisers
expected profitability in managing the Fund was not a material
factor.
The Board concluded that, in light of the foregoing factors and
the nature, extent and quality of the services rendered, the
profits expected to be realized by the Adviser and its
affiliates are reasonable.
Economies
of Scale
In reviewing management fees and profitability, the Board also
considered the extent to which the Adviser and its affiliates,
on the one hand, and the Fund, on the other hand, can expect to
realize benefits from economies of scale as the assets of the
Fund increase. The Board acknowledged the difficulty in
accurately measuring the benefits resulting from the economies
of scale with respect to the management of any specific fund or
group of funds. The Board also considered the fact that the Fund
will not be continuously offered and concluded that, in light of
the level of the Advisers projected profits with respect
to the Fund, the implementation of breakpoints in the advisory
fee schedule is not appropriate. Based upon the foregoing, the
Board concluded that the benefits from economies of scale are
expected to be shared equitably by the Adviser and its
affiliates, the
Sub-adviser,
and the Fund.
20
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
MANAGEMENT AND ORGANIZATION
Fund Management. The Trustees of Eaton Vance
Risk-Managed Diversified Equity Income Fund (the Fund) are
responsible for the overall management and supervision of the
Funds affairs. The Trustees and officers of the Fund are
listed below. Except as indicated, each individual has held the
office shown or other offices in the same company for the last
five years. Officers of the Fund hold indefinite terms of office
and Trustees term of office is noted below. The
noninterested Trustees consist of those Trustees who
are not interested persons of the Fund, as that term
is defined under the 1940 Act. The business address of each
Trustee and officer is The Eaton Vance Building, 255 State
Street, Boston, Massachusetts 02109 until March 22, 2009
and thereafter at Two International Place, Boston, Massachusetts
02110. As used below, EVC refers to Eaton Vance
Corp., EV refers to Eaton Vance, Inc.,
EVM refers to Eaton Vance Management,
BMR refers to Boston Management and Research and
EVD refers to Eaton Vance Distributors, Inc. EVC and
EV are the corporate parent and trustee, respectively, of EVM
and BMR. EVD is a wholly-owned subsidiary of EVC. Each officer
affiliated with Eaton Vance may hold a position with other Eaton
Vance affiliates that is comparable to his or her position with
EVM listed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term of
|
|
|
|
Number of
Portfolios
|
|
|
|
|
|
Position(s)
|
|
Office and
|
|
|
|
in Fund
Complex
|
|
|
|
Name and
|
|
with the
|
|
Length of
|
|
Principal
Occupation(s)
|
|
Overseen By
|
|
|
|
Date of
Birth
|
|
Fund
|
|
Service
|
|
During Past Five
Years
|
|
Trustee(1)
|
|
|
Other
Directorships Held
|
|
|
|
Interested
Trustee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Faust Jr.
5/31/58
|
|
Class I
Trustee and Vice
President
|
|
Until 2011. 3 years. Trustee and Vice President since 2007.
|
|
Chairman, Chief Executive Officer and President of EVC, Director
and President of EV, Chief Executive Officer and President of
EVM and BMR, and Director of EVD. Trustee
and/or
Officer of 173 registered investment companies and 4 private
companies managed by EVM or BMR. Mr. Faust is an interested
person because of his positions with EVM, BMR, EVD, EVC and EV,
which are affiliates of the Fund.
|
|
|
173
|
|
|
Director of EVC
|
|
Noninterested
Trustees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benjamin C. Esty
1/2/63
|
|
Class I
Trustee
|
|
Until 2011. 3 years. Trustee since 2007.
|
|
Roy and Elizabeth Simmons Professor of Business Administration,
Harvard University Graduate School of Business Administration.
|
|
|
173
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allen R. Freedman
4/3/40
|
|
Class I
Trustee
|
|
Until 2011. 3 years. Trustee since 2007.
|
|
Former Chairman (2002-2004) and a Director
(1983-2004)
of Systems & Computer Technology Corp. (provider of
software to higher education). Formerly, a Director of Loring
Ward International (fund distributor) (2005-2007). Formerly,
Chairman and a Director of Indus International, Inc. (provider
of enterprise management software to the power generating
industry) (2005-2007).
|
|
|
173
|
|
|
Director of Assurant, Inc. (insurance provider) and Stonemor
Partners L.P. (owner and operator of cemeteries)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William H. Park
9/19/47
|
|
Class II
Trustee
|
|
Until 2009. 3 years. Trustee since 2007.
|
|
Vice Chairman, Commercial Industrial Finance Corp. (specialty
finance company) (since 2006). Formerly, President and Chief
Executive Officer, Prizm Capital Management, LLC (investment
management firm)
(2002-2005).
|
|
|
173
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald A. Pearlman
7/10/40
|
|
Class II
Trustee
|
|
Until 2009. 3 years. Trustee since 2007.
|
|
Professor of Law, Georgetown University Law Center.
|
|
|
173
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helen Frame Peters
3/22/48
|
|
Class II
Trustee
|
|
Until 2009. 1 year. Trustee since 2008.
|
|
Professor of Finance, Carroll School of Management, Boston
College. Adjunct Professor of Finance, Peking University,
Beijing, China (since 2005).
|
|
|
173
|
|
|
Director of Federal Home Loan Bank of Boston (a bank for banks)
and BJs Wholesale Clubs (wholesale club retailer); Trustee
of SPDR Index Shares Funds and SPDR Series Trust (exchange
traded funds)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heidi L. Steiger
7/8/53
|
|
Class III
Trustee
|
|
Until 2010. 3 years. Trustee since 2007.
|
|
Managing Partner, Topridge Associates LLC (global wealth
management firm) (since 2008); Senior Advisor (since 2008),
President (2005-2008), Lowenhaupt Global Advisors, LLC (global
wealth management firm). Formerly, President and Contributing
Editor, Worth Magazine (2004-2005). Formerly, Executive Vice
President and Global Head of Private Asset Management (and
various other positions), Neuberger Berman (investment firm)
(1986-2004).
|
|
|
173
|
|
|
Director of Nuclear Electric Insurance Ltd. (nuclear insurance
provider) and Aviva USA (insurance provider)
|
21
Eaton Vance
Risk-Managed Diversified Equity Income
Fund
MANAGEMENT AND
ORGANIZATION CONTD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term of
|
|
|
|
Number of
Portfolios
|
|
|
|
|
|
Position(s)
|
|
Office and
|
|
|
|
in Fund
Complex
|
|
|
|
Name and
|
|
with the
|
|
Length of
|
|
Principal
Occupation(s)
|
|
Overseen By
|
|
|
|
Date of
Birth
|
|
Fund
|
|
Service
|
|
During Past Five
Years
|
|
Trustee(1)
|
|
|
Other
Directorships Held
|
|
|
Noninterested
Trustees (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lynn A. Stout
9/14/57
|
|
Class III
Trustee
|
|
Until 2010. 3 years. Trustee since 2007.
|
|
Paul Hastings Professor of Corporate and Securities Law (since
2006) and Professor of Law (2001-2006), University of California
at Los Angeles School of Law.
|
|
|
173
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ralph F. Verni
1/26/43
|
|
Chairman of
the Board
and Class III
Trustee
|
|
Until 2010. 3 years. Trustee and Chairman of the Board since
2007.
|
|
Consultant and private investor.
|
|
|
173
|
|
|
None
|
Principal Officers
who are not Trustees
|
|
|
|
|
|
|
|
|
|
|
Term of
|
|
|
|
|
Position
|
|
Office and
|
|
|
Name and
|
|
with the
|
|
Length of
|
|
Principal
Occupation(s)
|
Date of
Birth
|
|
Fund
|
|
Service
|
|
During Past Five
Years
|
|
|
|
|
|
|
|
|
Duncan W. Richardson
10/26/57
|
|
President
|
|
Since 2007
|
|
Executive Vice President and Chief Equity Investment Officer of
EVC, EVM and BMR. Officer of 81 registered investment companies
managed by EVM or BMR.
|
|
|
|
|
|
|
|
Michael A. Allison
10/26/64
|
|
Vice President
|
|
Since 2007
|
|
Vice President of EVM and BMR. Officer of 23 registered
investment companies managed by EVM or BMR.
|
|
|
|
|
|
|
|
Walter A. Row, III
7/20/57
|
|
Vice President
|
|
Since 2007
|
|
Vice President of EVM and BMR. Officer of 24 registered
investment companies managed by EVM or BMR.
|
|
|
|
|
|
|
|
Barbara E. Campbell
6/19/57
|
|
Treasurer
|
|
Since 2007
|
|
Vice President of EVM and BMR. Officer of 173 registered
investment companies managed by EVM or BMR.
|
|
|
|
|
|
|
|
Maureen A. Gemma
5/24/60
|
|
Secretary and
Chief Legal Officer
|
|
Secretary since 2007 and Chief Legal Officer since 2008
|
|
Vice President of EVM and BMR. Officer of 173 registered
investment companies managed by EVM or BMR.
|
|
|
|
|
|
|
|
Paul M. ONeil
7/1/53
|
|
Chief Compliance Officer
|
|
Since 2007
|
|
Vice President of EVM and BMR. Officer of 173 registered
investment companies managed by EVM or BMR.
|
|
|
|
(1)
|
|
Includes both master and feeder funds in a master-feeder
structure. |
In accordance with section 303A.12 (a) of the New York
Stock Exchange Listed Company Manual, the Funds Annual CEO
Certification certifying as to compliance with NYSEs
Corporate Governance Listing Standards was submitted to the
Exchange on December 16, 2008. The Fund has also filed its
CEO and CFO certifications required by Section 302 of the
Sarbanes-Oxley Act with the SEC as an exhibit to its most recent
Form N-CSR.
22
This Page Intentionally Left Blank
This Page Intentionally Left Blank
Investment
Adviser and Administrator of
Eaton Vance
Risk-Managed Diversified Equity Income Fund
Eaton Vance
Management
The Eaton Vance
Building
255 State Street
Boston, MA 02109
Sub-Adviser
of Eaton Vance Risk-Managed Diversified Equity Income
Fund
Rampart
Investment Management Company, Inc.
One International
Place
Boston, MA 02110
State Street
Bank and Trust Company
200 Clarendon
Street
Boston, MA 02116
American Stock
Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Independent
Registered Public Accounting Firm
Deloitte &
Touche LLP
200 Berkeley Street
Boston, MA
02116-5022
Eaton
Vance Risk-Managed Diversified Equity Income Fund
The Eaton Vance
Building
255 State
Street
Boston, MA
02109
Item 2. Code of Ethics
The registrant has adopted a code of ethics applicable to its Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer. The registrant undertakes to provide
a copy of such code of ethics to any person upon request, without charge, by calling
1-800-262-1122.
Item 3. Audit Committee Financial Expert
The registrants Board has designated William H. Park, an independent trustee, as its audit
committee financial expert. Mr. Park is a certified public accountant who is the Vice Chairman of
Commercial
Industrial Finance Corp (specialty finance company). Previously, he served as President and Chief
Executive Officer of Prizm Capital Management, LLC (investment management firm) and as Executive
Vice President and Chief Financial Officer of United Asset Management Corporation (UAM) (a
holding company owning institutional investment management firms).
Item 4. Principal Accountant Fees and Services
(a) (d)
The following table presents the aggregate fees billed to the registrant for the registrants
fiscal years ended December 31, 2007 and December 31, 2008 by the Funds principal accountant for
professional services rendered for the audit of the registrants annual financial statements and
fees billed for other services rendered by the principal accountant during such period.
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
12/31/07 |
|
12/31/08 |
|
Audit Fees |
|
$ |
57,000 |
|
|
$ |
60,035 |
|
Audit-Related Fees(1) |
|
|
0 |
|
|
|
0 |
|
Tax Fees(2) |
|
|
8,000 |
|
|
|
9,380 |
|
All Other Fees(3) |
|
|
0 |
|
|
|
0 |
|
|
|
|
Total |
|
$ |
65,000 |
|
|
$ |
69,415 |
|
|
|
|
|
|
|
(1) |
|
Audit-related fees consist of the aggregate fees billed for assurance and related
services that are reasonably related to the performance of the audit of financial statements
and are not reported under the category of audit fees. |
|
(2) |
|
Tax fees consist of the aggregate fees billed for professional services rendered by
the principal accountant relating to tax compliance, tax advice, and tax planning and
specifically include fees for tax return preparation. |
|
(3) |
|
All other fees consist of the aggregate fees billed for products and services
provided by the principal accountant other than audit, audit-related, and tax services. |
(e)(1) The registrants audit committee has adopted policies and procedures relating to the
pre-approval of services provided by the registrants principal accountant (the Pre-Approval
Policies). The Pre-Approval Policies establish a framework intended to assist the audit committee
in the proper discharge of its pre-approval responsibilities. As a general matter, the
Pre-Approval Policies (i) specify certain types of audit, audit-related, tax, and other services
determined to be pre-approved by the audit committee; and (ii) delineate specific procedures
governing the mechanics of the pre-approval process, including the approval and monitoring of audit
and non-audit service fees. Unless a service is specifically pre-approved under the Pre-Approval
Policies, it must be separately pre-approved by the audit committee.
The Pre-Approval Policies and the types of audit and non-audit services pre-approved therein must
be reviewed and ratified by the registrants audit committee at least annually. The registrants
audit committee maintains full responsibility for the appointment, compensation, and oversight of
the work of the registrants principal accountant.
(e)(2) No services described in paragraphs (b)-(d) above were approved by the registrants audit
committee pursuant to the de minimis exception set forth in Rule 2-01(c)(7)(i)(C) of Regulation
S-X.
(f) Not applicable.
(g) The following table presents (i) the aggregate non-audit fees (i.e., fees for audit-related,
tax, and other services) billed to the registrant by the registrants principal accountant for the
registrants fiscal year ended December 31, 2007 and the fiscal year ended December 31, 2008; and
(ii) the aggregate non-audit fees (i.e., fees for audit-related, tax, and other services) billed
for services rendered to the Eaton Vance organization for the registrants principal accountant for
the same time periods, respectively.
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
12/31/07 |
|
12/31/08 |
|
Registrant |
|
$ |
8,000 |
|
|
$ |
9,380 |
|
Eaton Vance1 |
|
$ |
281,446 |
|
|
$ |
345,473 |
|
|
|
|
(1) |
|
The Investment adviser to the registrant, as well as any of its affiliates that provide ongoing
services to the registrant, are subsidiaries of Eaton Vance Corp. |
(h) The registrants audit committee has considered whether the provision by the registrants
principal accountant of non-audit services to the registrants investment adviser and any entity
controlling, controlled by, or under common control with the adviser that provides ongoing services
to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X is
compatible with maintaining the principal accountants independence.
Item 5. Audit Committee of Listed registrants
The registrant has a separately-designated standing audit committee established in accordance with
Section 3(a)(58)(A) of the Securities and Exchange Act of 1934, as amended. William H. Park
(Chair), Lynn A. Stout, Heidi L. Steiger and Ralph E. Verni are the members of the registrants
audit committee.
Item 6. Schedule of Investments
Please see schedule of investments contained in the Report to Stockholders included under Item 1 of
this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment
Companies
The Board of Trustees of the Trust has adopted a proxy voting policy and procedure (the Fund
Policy), pursuant to which the Trustees have delegated proxy voting responsibility to the Funds
investment adviser and adopted the investment advisers proxy voting policies and procedures (the
Policies) which are described below. The Trustees will review the Funds proxy voting records
from time to time and will annually consider approving the Policies for the upcoming year. In the
event that a conflict of interest arises between the Funds shareholders and the investment
adviser, the administrator, or any of their affiliates or any affiliate of the Fund, the investment
adviser will generally refrain from voting the proxies related to the companies giving rise to such
conflict until it consults with the Boards
Special Committee except as contemplated under the Fund Policy. The Boards Special Committee will
instruct the investment adviser on the appropriate course of action.
The Policies are designed to promote accountability of a companys management to its shareholders
and to align the interests of management with those shareholders. An independent proxy voting
service (Agent), currently Institutional Shareholder Services, Inc., has been retained to assist
in the voting of proxies through the provision of vote analysis, implementation and recordkeeping
and disclosure services. The investment adviser will generally vote proxies through the Agent.
The Agent is required to vote all proxies and/or refer then back to the investment adviser pursuant
to the Policies. It is generally the policy of the investment adviser to vote in accordance with
the recommendation of the Agent. The Agent shall refer to the investment adviser proxies relating
to mergers and restructurings, and the disposition of assets, termination, liquidation and mergers
contained in mutual fund proxies. The investment adviser will normally vote against anti-takeover
measures and other proposals designed to limit the ability of shareholders to act on possible
transactions, except in the case of closed-end management investment companies. The investment
adviser generally supports management on social and environmental proposals. The investment
adviser may abstain from voting from time to time where it determines that the costs associated
with voting a proxy outweighs the benefits derived from exercising the right to vote or the
economic effect on shareholders interests or the value of the portfolio holding is indeterminable
or insignificant.
In addition, the investment adviser will monitor situations that may result in a conflict of
interest between the Funds shareholders and the investment adviser, the administrator, or any of
their affiliates or any affiliate of the Fund by maintaining a list of significant existing and
prospective corporate clients. The investment advisers personnel responsible for reviewing and
voting proxies on behalf of the Fund will report any proxy received or expected to be received from
a company included on that list to the personal of the investment adviser identified in the
Policies. If such personnel expects to instruct the Agent to vote such proxies in a manner
inconsistent with the guidelines of the Policies or the recommendation of the Agent, the personnel
will consult with members of senior management of the investment adviser to determine if a material
conflict of interests exists. If it is determined that a material conflict does exist, the
investment adviser will seek instruction on how to vote from the Special Committee.
Information on how the Fund voted proxies relating to portfolio securities during the most recent
12 month period ended June 30 is available (1) without charge, upon request, by calling
1-800-262-1122, and (2) on the Securities and Exchange Commissions website at http://www.sec.gov.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Walter A. Row, Michael A. Allison and other Eaton Vance Management (EVM) investment professionals
comprise the investment team responsible for the overall management of the Funds investments,
providing the sub-adviser with research support and supervising the performance of the sub-adviser,
Rampart Investment Management Company, Inc. (Rampart). Mr. Row and Mr. Allison are the portfolio
managers responsible for the day-to-day management of EVMs responsibilities with respect to the
Funds investment portfolio. Mr. Row is a Vice President and Head of Structured Equity Portfolios
at EVM. He is a member of EVMs Equity Strategy Committee and co-manages other Eaton
Vance registered investment companies. He joined Eaton Vances equity group in 1996. Mr. Allison
is a Vice President of EVM and a co-portfolio manager for other Eaton Vance registered investment
companies. He is a member of EVMs Equity Strategy Committee. He first joined Eaton Vances
equity group in 2000.
Ronald M. Egalka is responsible for the development and implementation of Ramparts options
strategy utilized in managing the Fund. Mr. Egalka has been with Rampart since 1983 and is its
President and CEO.
The following tables show, as of the Funds most recent fiscal year end, the number of accounts
each portfolio manager managed in each of the listed categories and the total assets in the
accounts managed within each category. The table also shows the number of accounts with respect to
which the advisory fee is based on the performance of the account, if any, and the total assets in
those accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Total Assets of |
|
|
|
|
|
|
|
|
|
|
Accounts |
|
Accounts |
|
|
Number |
|
Total Assets |
|
Paying a |
|
Paying a |
|
|
of All |
|
of All |
|
Performance |
|
Performance |
|
|
Accounts |
|
Accounts* |
|
Fee |
|
Fee* |
Walter A. Row |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Investment
Companies |
|
|
10 |
|
|
$ |
10,246.6 |
|
|
|
0 |
|
|
$ |
0 |
|
Other Pooled Investment Vehicles |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Other Accounts |
|
|
1 |
|
|
$ |
0.4 |
|
|
|
0 |
|
|
$ |
0 |
|
Michael A. Allison |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Investment
Companies |
|
|
8 |
|
|
$ |
10,582.6 |
|
|
|
0 |
|
|
$ |
0 |
|
Other Pooled Investment Vehicles |
|
|
17 |
|
|
$ |
7,242.6 |
|
|
|
0 |
|
|
$ |
0 |
|
Other Accounts |
|
|
1 |
|
|
$ |
0.4 |
|
|
|
0 |
|
|
$ |
0 |
|
Ronald M. Egalka |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Investment
Companies |
|
|
7 |
|
|
$ |
9,027.4 |
|
|
|
2 |
|
|
$ |
1,586.4 |
|
Other Pooled Investment Vehicles |
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
Other Accounts |
|
|
354 |
|
|
$ |
785.3 |
|
|
|
0 |
|
|
$ |
0 |
|
* In millions of dollars.
The following table shows the dollar range of Fund shares beneficially owned by each portfolio
manager as of the Funds most recent fiscal year end.
|
|
|
|
|
|
|
Dollar Range of |
|
|
Equity Securities |
Portfolio Manager |
|
Owned in the Fund |
Walter A. Row |
|
$ |
100,001-$500,000 |
|
Michael A. Allison |
|
$ |
50,001-$100,000 |
|
Ronald M. Egalka |
|
None |
Potential for Conflicts of Interest. It is possible that conflicts of interest may arise in
connection with a portfolio managers management of a Funds investments on the one hand and the
investments of other accounts for which the portfolio manager is responsible on the other. For
example, a portfolio manager may have conflicts of interest in allocating management time,
resources and investment opportunities among the Fund and other accounts he or she advises. In
addition, due to differences in the investment strategies or restrictions between a Fund and the
other accounts, a portfolio manager may take action with respect to another account that differs
from the action taken with respect to the Fund. In some cases, another account managed by a
portfolio manager may compensate the investment adviser or sub-adviser based on the performance of
the securities held by that account. The existence of such a performance based fee may create
additional conflicts of interest for the portfolio manager in the allocation of management time,
resources and investment opportunities. Whenever conflicts of interest arise, the portfolio
manager will endeavor to exercise his or her discretion in a manner that he or she believes is
equitable to all interested persons. EVM and the sub-adviser have adopted several policies and
procedures designed to address these potential conflicts including: a code of ethics; and policies
which govern the investment adviser or sub-advisers trading practices, including among other
things the aggregation and allocation of trades among clients, brokerage allocation, cross trades
and best execution.
Compensation Structure for EVM
Compensation of EVMs portfolio managers and other investment professionals has three primary
components: (1) a base salary, (2) an annual cash bonus, and (3) annual stock-based compensation
consisting of options to purchase shares of EVCs nonvoting common stock andr restricted shares of
EVCs nonvoting common stock. EVMs investment professionals also receive certain retirement,
insurance and other benefits that are broadly available to EVMs employees. Compensation of EVMs
investment professionals is reviewed primarily on an annual basis. Cash bonuses, stock-based
compensation awards, and adjustments in base salary are typically paid or put into effect at or
shortly after the October 31st fiscal year end of EVC.
Method to Determine Compensation. EVM compensates its portfolio managers based primarily on the
scale and complexity of their portfolio responsibilities and the total return performance of
managed funds and accounts versus appropriate peer groups or benchmarks. In addition to rankings
within peer
groups of funds on the basis of absolute performance, consideration may also be given to relative
risk-adjusted performance. Risk-adjusted performance measures include, but are not limited to, the
Sharpe Ratio. Performance is normally based on periods ending on the September 30th preceding
fiscal year end. Fund performance is normally evaluated primarily versus peer groups of funds as
determined by Lipper Inc. and/or Morningstar, Inc. When a funds peer group as determined by
Lipper or Morningstar is deemed by EVMs management not to provide a fair comparison, performance
may instead be evaluated primarily against a custom peer group. In evaluating the performance of a
fund and its manager, primary emphasis is normally placed on three-year performance, with secondary
consideration of performance over longer and shorter periods. For funds that are tax-managed or
otherwise have an objective of after-tax returns, performance is measured net of taxes. For other
funds, performance is evaluated on a pre-tax basis. For funds with an investment objective other
than total return (such as current income), consideration will also be given to the funds success
in achieving its objective. For managers responsible for multiple funds and accounts, investment
performance is evaluated on an aggregate basis, based on averages or weighted averages among
managed funds and accounts. Funds and accounts that have performance-based advisory fees are not
accorded disproportionate weightings in measuring aggregate portfolio manager performance.
The compensation of portfolio managers with other job responsibilities (such as heading an
investment group or providing analytical support to other portfolios) will include consideration of
the scope of such responsibilities and the managers performance in meeting them.
EVM seeks to compensate portfolio managers commensurate with their responsibilities and
performance, and competitive with other firms within the investment management industry. EVM
participates in investment-industry compensation surveys and utilizes survey data as a factor in
determining salary, bonus and stock-based compensation levels for portfolio managers and other
investment professionals. Salaries, bonuses and stock-based compensation are also influenced by the
operating performance of EVM and its parent company. The overall annual cash bonus pool is based on
a substantially fixed percentage of pre-bonus operating income. While the salaries of EVMs
portfolio managers are comparatively fixed, cash bonuses and stock-based compensation may fluctuate
significantly from year to year, based on changes in manager performance and other factors as
described herein. For a high performing portfolio manager, cash bonuses and stock-based
compensation may represent a substantial portion of total compensation.
Compensation Structure for Rampart
The identified Rampart portfolio managers are founding shareholders of Rampart. The compensation
of the portfolio managers has two primary components: (1) a base salary, and (2) an annual cash
bonus. There are also certain retirement, insurance and other benefits that are broadly available
to all Rampart employees. Compensation of Rampart investment professionals is reviewed primarily
on an annual basis. Cash bonuses and adjustments in base salary are typically paid or put into
effect at or shortly after the June 30 fiscal year-end of Rampart.
Rampart compensates its founding shareholders, including the identified portfolio managers, based
primarily on the scale and complexity of their responsibilities. The performance of portfolio
managers is evaluated primarily based on success in achieving portfolio objectives for managed
funds and accounts. Rampart seeks to compensate all portfolio managers commensurate with their
responsibilities
and performance, and competitive with other firms within the investment management industry. This
is reflected in the founding shareholders/identified portfolio managers salaries.
Salaries and profit participations are also influenced by the operating performance of Rampart.
While the salaries of Ramparts founding shareholders/identified portfolio managers are
comparatively fixed, profit participations may fluctuate substantially from year to year, based on
changes in financial performance.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated
Purchasers.
No such purchases this period.
Item 10. Submission of Matters to a Vote of Security Holders.
No Material Changes.
Item 11. Controls and Procedures
(a) It is the conclusion of the registrants principal executive officer and principal financial
officer that the effectiveness of the registrants current disclosure controls and procedures (such
disclosure controls and procedures having been evaluated within 90 days of the date of this filing)
provide reasonable assurance that the information required to be disclosed by the registrant has
been recorded, processed, summarized and reported within the time period specified in the
Commissions rules and forms and that the information required to be disclosed by the registrant
has been accumulated and communicated to the registrants principal executive officer and principal
financial officer in order to allow timely decisions regarding required disclosure.
(b) There have been no changes in the registrants internal controls over financial reporting
during the second fiscal quarter of the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrants internal control over financial
reporting.
Item 12. Exhibits
|
|
|
(a)(1)
|
|
Registrants Code of Ethics Not applicable (please see Item 2). |
|
(a)(2)(i)
|
|
Treasurers Section 302 certification. |
|
(a)(2)(ii)
|
|
Presidents Section 302 certification. |
|
(b)
|
|
Combined Section 906 certification. |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Eaton Vance Risk-Managed Diversified Equity Income Fund
|
|
|
|
|
By:
|
|
/s/ Duncan W. Richardson
|
|
|
|
|
Duncan W. Richardson |
|
|
|
|
President |
|
|
|
|
|
|
|
Date:
|
|
February 10, 2009 |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, this report has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
|
|
|
|
|
By:
|
|
/s/ Barbara E. Campbell
|
|
|
|
|
Barbara E. Campbell |
|
|
|
|
Treasurer |
|
|
|
|
|
|
|
Date:
|
|
February 10, 2009 |
|
|
|
|
|
|
|
By:
|
|
/s/ Duncan W. Richardson
|
|
|
|
|
Duncan W. Richardson |
|
|
|
|
President |
|
|
|
|
|
|
|
Date:
|
|
February 10, 2009 |
|
|